A socially oriented non-financial development institution and a major organizer of international conventions, congress, exhibitions, business, social and sporting, public, and cultural events.

The Roscongress Foundation is a socially oriented non-financial development institution and a major organizer of international conventions; exhibitions; and business, public, sporting, and cultural events. It was established in pursuance of a decision by the President of the Russian Federation.

The Foundation was established in 2007 with the aim of facilitating the development of Russia’s economic potential, promoting its national interests, and strengthening the country’s image. One of the roles of the Foundation is to comprehensively evaluate, analyse, and cover issues on the Russian and global economic agendas. It also offers administrative services, provides promotional support for business projects and attracting investment, and helps foster social entrepreneurship and charitable initiatives.

Each year, the Foundation’s events draw participants from 208 countries and territories, with more than 15,000 media representatives working on-site at Roscongress’ various venues. The Foundation benefits from analytical and professional expertise provided by 5000 people working in Russia and abroad. In addition, it works in close cooperation with 159 economic partners; industrialists’ and entrepreneurs’ unions; and financial, trade, and business associations from 75 countries worldwide.

The Roscongress Foundation has Telegram channels in Russian (t.me/Roscongress), English (t.me/RoscongressDirect), and Spanish (t.me/RoscongressEsp). Official website and Information and Analytical System of the Roscongress Foundation: roscongress.org.

RC personal account
Восстановление пароля
Введите адрес электронной почты или телефон, указанные при регистрации. Вам будет отправлена инструкция по восстановлению пароля.
Некорректный формат электронной почты или телефона
Regional Development: An Economy of Possibilities
4 June 2021
12:00—13:15
KEY CONCLUSIONS
.

When it comes to development, it is important for regions to get new opportunities. Basically, the government <...> has created this mechanism. When we say infrastructure menu or budgetary and infrastructure loans, we mean getting the opportunity to earn this way and to get a development budget. <...> We will select projects and will be ready to defend those projects and develop them additionally. Budgetary and infrastructure loans worth RUB 500 billion alone and infrastructure bonds worth RUB 500 billion. <...> It is important that these mechanisms will help us with such big projects. However, we would like more — Alexey Texler, Governor of Chelyabinsk region.

Indeed, any region <...> has opportunities. The question is whether conditions are stable. Today, we have discussed regional subsidy recalculation. It applied to the regions that got subsidies from the federal budget. The change in the tax legislation simply deprives us of our income and redistributes it in favour of the federal budget. Long-term and mid-term investment takes stability, which will motivate regions to strive for additional earnings. <...> If we redistribute what regions with a high share of investment earn, we will make things worse mid-term. This is why stable conditions we work under <...> are crucial for all regions. In this case, optimization mechanisms get launched at the bottom or micro level. It means that you can change the system at the macro level. Otherwise if you improve your efficiency and it is taken away, what is the point of it? — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Regions are the cornerstone of reaching our national goals. We cannot do it without our regions. It is obvious. This is why it is not just about the money. We have discussed it a lot today. At the same time, it is unattainable without money – we understand it, too. <...> The resources the government allocates for national goals cannot be ignored. Most of this money end up in regions that always say they do not have enough. <...> There can never be too much money. There will always be a shortage. You see, reaching goals takes inventiveness. We witness how a whole range of regions resolve their issues and achieve designated results, while others keep complaining they never get enough money. <...> A lot of it is managerial decisions. This why I believe we need a shift from the old idea ‘give us money’ to the new agenda, which will teach them to build a motivation and management system for reaching goals — Anton Siluanov, Minister of Finance of the Russian Federation.

Regions can and should be trusted with money. They know how to use it and how to develop. We need to get criteria aligned. We need to agree on efficiency level for these projects, since they use loans anyway. We should measure efficiency of the whole economic development it brings instead of efficiency of a specific project — Maksim Reshetnikov, Minister of Economic Development of the Russian Federation.

I suggest we start the next discussion with the question of year-over-year changes instead of the status of interbudgetary relations regardless of who participates or moderates. I believe this will give the discussion an impetus to focus on changes instead of the status itself. I think this is what the President meant when he said in his address: “The country develops only when regions develop. We will support only the regions that take on the responsibility”. They do take the responsibility. This, however, does not mean that it is only the regions that bear the responsibility for the results and people’s lives. <...> Technically, it is all of us – all ministries and agencies, the State Duma, and the Government as a whole – we all are in charge of the situation — Andrey Makarov, Chairman of the Committee on Budget and Taxes, The State Duma of the Federal Assembly of the Russian Federation.

ISSUES
The gap between equalisation transfer and the funds received from federal and local budgets

Our equalisation transfer amounts to RUB 731 billion, which is the funds that regions can use for their development. At the same time, tax cuts provided by the federal budget at the expense of regional and local budgets (at the expense of the taxes collected to the regional and local budgets) amount to RUB 1 trillion. It means that we, on the one hand, give them RUB 700 billion and, on the other hand, take RUB 1 trillion from them, saying: ‘Live large. Do not forget to develop’ — Andrey Makarov, Chairman of the Committee on Budget and Taxes, The State Duma of the Federal Assembly of the Russian Federation.

A smaller share of investment in budget expenditures

Over almost ten years, the share of investment in Russian regions’ consolidated budgets became almost twice smaller. It definitely shows that regions must stick to a whole range of other obligations to fulfil their social commitments. This leaves them without funds for development — Andrey Makarov, Chairman of the Committee on Budget and Taxes, The State Duma of the Federal Assembly of the Russian Federation.

Mr Makarov, you showed a slide with the investment share being down from 17% to 11%. What does it tell us? It tells us we are cutting on our own opportunities for earning. The less we invest, the less we earn — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Distributing taxes among regions

Almost two-thirds of all our taxes [are distributed, – Ed.] among ten most successful regions. <...> If we take basic taxes, personal income tax accounts for 60% and profit tax accounts for 56%. This is the situation in the most developed regions, while we have 75 more — Andrey Makarov, Chairman of the Committee on Budget and Taxes, The State Duma of the Federal Assembly of the Russian Federation.

Those ten regions are the basis for the economic model of the whole country. Is it good or is it bad? We are saying that agglomerations – large economic centres – determine the level of economic development. They drive our economy. We have a large territory and different regions. Some of them do not have any major industry or any opportunities for providing services to local residents, as they do not have any conditions for that to this day. Of course, their fiscal capacity is also different — Anton Siluanov, Minister of Finance of the Russian Federation.

Less transfer payments and more subsidies, subventions and other interbudgetary transfers

Over the last five years, <...> transfer payments, i.e. the money regions can spend on development or other purposes and do it at their own discretion, <...> went down. At the same time, we provide more targeted money, i.e. when we tell them how much they must spend on specific things — Andrey Makarov, Chairman of the Committee on Budget and Taxes, The State Duma of the Federal Assembly of the Russian Federation.

Not enough money for regional development

Many [regions, – Ed.] face the situation when they do not have enough for current obligations, let alone development. This is why the borrow. When one borrows for current obligations, it is not development – it is disinvestment — Alexey Texler, Governor of Chelyabinsk region.

Underfinanced regions

We really underfinance our regions. If you take adding 1% to the corporate tax (it is part of the equalisation transfer) out of the equation, we will see that equalisation transfer have not changed since 2014, I believe — Maksim Reshetnikov, Minister of Economic Development of the Russian Federation.

Insurance payments for the unemployed cannot be regulated

Why are talking about the insurance payments for the unemployed? This power of ours is worth 10% of the budget, which is quite a lot of money – RUB 4.6 billion. We cannot regulate it ourselves. It is regulated at the federal level only. The amount, the readjustments, the procedures, etc. – all of it is regulated at the federal level — Nikolay Lubimov, Governor of Ryazan Region.

Education and healthcare expenditures are barely growing

Generally, social support in our country is on the rise quire significantly. <...> See how education and healthcare expenditures are barely growing. Yet, they are on people’s minds just as much. By the way, they play an important role in the human capital development, much like the social sphere — Andrey Makarov, Chairman of the Committee on Budget and Taxes, The State Duma of the Federal Assembly of the Russian Federation.

SOLUTIONS
Federalism as the basic principle for interbudgetary relations

We are a federal state and we use federalism as the basic principle for interbudgetary relations. <...> When it comes to federalism or manual control, we have to opt for targeted transfers to help the rest 75 regions reach the goals set the country’s leadership. This is the only way. <...> It will not work, if we ignore the national goals set by the President and do not provide resources to those who do not have enough money in their budgets to reach those targets. <...> I believe that we still use the centralized control mechanism. It is not quite manual though, yet it is centralized. It means that reaching the targets takes everybody to get aligned. I do not think there is anything bad about it — Anton Siluanov, Minister of Finance of the Russian Federation.

Budget expenditures split into current expenditures and investment

As for budget expenditures, we believe they should be split into two parts. <...> There are regional obligations and targets set by the President, <...> which must be fulfilled. Yet, many of those targets are current ones. They include social commitments and maintaining the region’s status and ability to function. It is definitely the costs and obligations, which, as Mr Siluanov has rightfully put it, regions are unable to maintain without the federal budget. There is another important part to it, which is regional investment. Why is it important? Because private investment will not be possible without regional investment, first and foremost in infrastructure — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Higher fiscal revenues through government investment

Over the last years, we have witnessed the following pattern: one rouble of our investment brings three roubles of private investment. <...> At the same time, we have calculated the positive value for money based on fiscal revenues. It means that on average every rouble of our investment brings three roubles of private investment and 60 additional kopecks to the federal budget. <...> Moreover, these investments create a tax base for the future, which helps this money earn even more in the future — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Optimizing current expenditures to increase the investment share

Everybody thinks that Moscow’s budget is huge. <...> Over the last years, since 2011 – if we take comparable prices – it went only 8% up. This figure is comparable to the changes in the federal budget, though its growth rate has been a bit higher. However, our investment share went up from 15% to 37–38% only because we realized that these revenues depended solely on our own efficiency. It does not change much with time. We started optimizing our current expenditures. <...> It freed up some money, which we immediately started investing. These investments take some time to show effect. In 2011–2012, the budget structure changed, and we started investing, while it gave its first results around 2015–2016 — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Reallocations are needed – there is no doubt about that. However, there is always a fine line between aligning and equalisation. We should not cross this line. <...> We need to micromanage. We need to optimize the costs we can actually nix and let regions use this money for different purposes, like salaries, healthcare, social support, roads, etc. — Maksim Reshetnikov, Minister of Economic Development of the Russian Federation.

Setting fixed transfer payments for regions

When we address region’s affluence – as Mr Siluanov rightfully puts it – we need to target social issues. This is the only way, while the funds need to be targeted. Another question goes out to the regions. <...> Sense of security is very important. If only they knew that subsidies from the federal budget are fixed for five years and cannot be changed (only adjusted based on the inflation level), the regions would be motivated to optimize their current expenditures. This would allow them to free up money and use it for investment, otherwise it will simply not work out. Most importantly, revenues will not go up, unless investments go up. <...> If the Ministry of Finance could set the level of transfer payments for some time – let’s say 3–5 years – it would give regions an impetus to improve their efficiency — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Increasing regions’ responsibility

Regions are prepared to take on more responsibilities, while the number of governors with KPI only proves that this is what we are aiming. <...> There is a new term ‘COVID-related federalism’, which means that regions have got more opportunities and responsibilities. <...> To a great extent, governors have been successfully dealing with it. <...> The idea is fairly simple: probably, we will not be able to make all 85 regions self-sufficient, but striving for over half of our regions being independent is right — Alexey Texler, Governor of Chelyabinsk region.

Using the revenues of better-off regions to cover the expenditures on the unemployed

There is a simple recipe to resolve Russian regions’ issues. <...> We have discussed reassigning the expenditures on the unemployed to the federal budget, which is a huge amount of over RUB 700 billion. The federal centre needs additional sources of revenue. Let’s take 3% of the corporate tax — Anton Siluanov, Minister of Finance of the Russian Federation.

We will not resolve the regions’ issues. When say ‘take it from them and redistribute’, which includes expenditures on the unemployed, it means taking our investment expenditures from us and ten other regions, which will suffer from this decision — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Creating economic incentives for cost optimization

Here is a question related to current cost optimization. It cannot be resolved without economic incentives. <...> When it comes to current cost optimization, it should just be our goal – it should come with economic incentives. If you ask what money we have freed up, it includes optimizing education, healthcare and social infrastructure in general. <...> Regions should have a sense of security, when they enjoy a stable situation and economic incentives: if you managed to save money, you can use it for development. In this case, the number of schools with one student only will be going down. The funds that free up can be used for road development, for instance — Vladimir Efimov, Deputy Mayor of the City of Moscow for Economic Policy and Property and Land Relations.

Aligning minimal transfer payments

I believe that minimal transfer payments need to be aligned. These expenditures need to be treated as the necessary investment or social expenditures, because this is what regions spend money on. <...> In this case, higher expenditures to get transfer payments aligned can claim additional financing, much like other programmes and priorities, including digitalization, tourism, federal targeted investment programmes, or construction. They need to be treated just as seriously — Maksim Reshetnikov, Minister of Economic Development of the Russian Federation.

Flexibility or reassigning expenditures on the unemployed to the federal budget

We should either be allowed to be more flexible or we should consider gradually reassigning this power and appropriate funding to the federal level — Nikolay Lubimov, Governor of Ryazan Region.